Guide to Forming an LLC in Arizona
Follow our free guide to form an LLC in Arizona
- Pros and Cons of Forming an LLC in Arizona
- Starting Your Arizona LLC
- Maintaining Your Arizona LLC
- Additional Arizona Resources
If you’re thinking about forming an LLC in Arizona, read through our guide covering the pros, cons, and how to start and maintain your Arizona LLC.
Pros and Cons of Forming an LLC in Arizona
Major Metro Area (Phoenix)
Phoenix is the fifth largest city in the nation, and its exceptional 1.95% growth is more than double that of Houston, Los Angeles, and New York City. The Phoenix/Mesa/Scottsdale metro area has seen a substantial increase in the past few years, from $195 million in 2012 to almost $245 million in 2017.
No Corporate Taxes for LLCs
Arizona does not require LLCs to pay any corporate or franchise tax. The only taxes owed by LLC members are state and federal income taxes.
No Annual Report Due
Arizona is one of the few states in the country that does not require LLCs to file an annual report. Not all businesses are exempt from this task—corporations and non-profit organizations must still submit an annual report.
Less Privacy for Owners
While the owners of an LLC are not listed in the filing paperwork, Arizona’s publication rule for new businesses demands a full disclosure of either the LLC manager(s) or all of the members. The name and contact information of each manager/member must be listed.
Arizona is one of the few states that requires new businesses to publish a Notice of Formation in a designated newspaper for three consecutive weeks. This must be completed within 60 days of forming the business, and the cost can run between $30 to over $300.
Cost of Doing Business
- $50 filing fee/ no annual fee
- $30-$300 Publication Fee
- No corporate tax
Phase One: Starting Your Arizona LLC
You might assume that forming an LLC in Arizona is a difficult task, but the first part of the process can be done in a few steps—and it is much less confusing when you have professional help.
The steps needed to build your Arizona LLC are:
- Step 1: Name your LLC
- Step 2: Establish Ownership of the LLC
- Step 3: Choose a Statutory Agent
- Step 4: File the Articles of Organization
- Step 5: Complete the Publication Requirement
- Step 6: Create your Operating Agreement
- Step 7: Register for an EIN
Step 1: Name Your Arizona LLC
Finding a name for your new business is an important first step in forming your Arizona LLC. As you narrow down the list of possible company names, there are a few guidelines set by the state and federal government concerning business names to keep in mind.
Tip: Use a free business name search tool to ensure your company’s desired name is available.
- The official name of your business must end with: Limited Liability Company, Limited Company, LLC, or L.L.C.
- Your business name cannot be intentionally misleading to consumers
- The name of your new LLC must not be similar to another organization’s name/trademark
A few restrictions do exist regarding the name of your LLC, depending on the state where you are starting your business.
A few examples include:
- “Lottery” and “Bank” are ineligible for use (any state)
- Terms that represent educational or Veterans’ organizations are restricted
- Terms related to the Armed Forces or civil servants (police, EMT, fire)
LLC business names associated with government and/or financial entities are not always restricted—it depends on the state laws. Additional paperwork may be required.
Create an online presence for your LLC by creating a website. Check domain name availability at a number of online web services sites.
Step 2: Establish Ownership
The owners of an LLC are known as either as members or managers, depending on the chosen management structure of the business.
LLCs have two management structures:
- Member-managed: Ownership of business is divided among the members and all parties receive portions of the profits.
- Manager-managed: The appointed manager is the main operator and the members are passive investors who are not actively involved in the daily business operations.
After you have selected a name for your business, you then need to choose a management structure and designate the members of the LLC. The rules concerning LLC ownership in Arizona include:
Required Number of Members
Arizona LLCs must have at least one member or manager in order to form a business.
Member Disclosure Requirements
An organizer may sign and file the Articles of Organization in place of the LLC members.
LLC members in Arizona may be of any age. An organizer must be at least 18 years old.
There are no residency restrictions imposed on LLC members in Arizona.
Step 3: Find a Statutory Agent in Arizona
The statutory agent, also known as a registered agent, is necessary for all LLCs formed in Arizona. Your business cannot be official without filling this position.
What is a statutory agent?
A statutory agent is the authorized person or business that can accept official government notices (including the Secretary of State) and services on behalf of the LLC.
Why do you need a statutory agent?
Arizona law requires you to appoint a statutory agent so that the state government has a consistent contact person for your LLC.
What are the main requirements for a statutory agent?
- The statutory agent must have a physical address — not a P.O. Box
- The statutory agent must be available during business hours
Who can be a statutory agent in Arizona?
The requirements to be a statutory agent are as follows:
- A resident with a physical address in Arizona
- An LLC or corporation that is licensed to conduct business in Arizona
Is the statutory agent’s contact information publicly accessible?
The name and contact information of the LLC’s registered agent is a matter of public record.
Can I be my own statutory agent for my business?
You are legally allowed to be your own statutory agent as long as you have a physical address in Arizona
Is being my own statutory agent discouraged?
Since the statutory agent’s name and address are publicly listed, LLC business owners who choose to be their own statutory agent risk compromising their personal information.
Tip: Avoid the hassles that come with being your own Statutory agent and choose Swyft Filings to fill the Statutory agent needs for small businesses in Arizona. Find more information here.
Step 4: File the Articles of Organization
One of the most important steps involved in officially (and legally) forming an LLC in Arizona is filing the Articles of Organization with the Secretary of State.
What is the Articles of Organization?
The Articles of Organization is a legally binding document that is filed with the state government to officially and legally form your LLC.
Why do I need the Articles of Organization?
Your LLC business in Arizona will not be legally recognized by the Secretary of State without filing this document. Consider the Articles of Organization as part of your LLC’s foundation.
What is the cost of filing the Articles of Organization?
The filing fee for Arkansas is $50.
What information is included in the Articles of Organization?
- The name and address of the LLC
- The type of registered agent (personal or commercial)
- The name of the members or organizer filing the paperwork
- The name and location of the registered agent
- The chosen LLC management structure
- The duration of the LLC (perpetual or not)
Additional Arizona Filing Requirements - Professional LLCs
Arizona also allows professional service businesses to form a specific type of LLC known as a Professional Limited Liability Company (PLLC).
Typical professions that form a PLLC:
- Professional Counselors and Psychologists
- Architects and Engineers
- Social Workers
A few points to consider:
- All members of the PLLC must be licensed in the profession of the business.
- The PLLC is allowed to provide services outside of the business’s original intent.
- The members are still subject to whichever licensing boards govern the PLLC’s profession.
Step 5: Create an LLC Operating Agreement
An LLC Operating Agreement is considered a vital necessity for any successful business to add structure and projects a sense of professionalism.
A recent change to Arizona LLC laws will soon affect the contents of the Operating Agreement, as well as its mandatory status with the state. The new law will go into effect in September 2019.
What is an LLC Operating Agreement?
The LLC Operating Agreement is a legal document that details the operational procedures of the business and clearly defines the rights and responsibilities of each person involved in the business.
Why do I need an LLC Operating Agreement?
The LLC Operating Agreement ensures the stability and structure of the LLC and reduces future disputes since it defines the roles of the business’s members and provides direction for daily operations.
Do I need to file the LLC Operating Agreement?
You do not need to file the Operating Agreement with the state; it is for the benefit of your LLC and remains in-house.
What goes into an LLC Operating Agreement?
While there is not a set rule of what must be included in your LLC operating Agreement, most documents include the following the information:
- List of the members/managers and their roles
- Designation of authority in the LLC
- Initial capital contributions of the members
- Voting designations and percentages of the members
- Member transfer/addition rules and restrictions
- Distribution of profits
- Meeting schedule
Tip: Get a customized LLC Operating Agreement for your small business with Swyft Filings. Add structure to your LLC now.
Step 6: Complete the Publication Requirement
Arizona is one of a few states that requires all newly formed LLC business owners to publish notification of LLC formation in two different newspapers for three consecutive weeks. The time frame for completion is 60 days from receiving notice from the Arizona Corporations Commission.
Important to Know:
- The newspapers must be chosen from a designated list
- Businesses in Maricopa and Pima counties are exempt
- The fees vary—typical cost ranges from $30 to $300
- Upon completion, the publication will send an Affidavit of Publication
Please Note: the Affidavit of Publication must remain in the LLC’s business records.
Information included in the Notice of LLC Formation:
- The name and address of the LLC
- The name and location of the statutory agent
- The chosen management structure of the LLC
- The name and contact information of the LLC manager(s) OR
- The name and contact information of each LLC member
Step 7: Obtain an EIN
The state of Arizona requires an EIN for any business that has/will have employees. Additionally, most banks and financial institutions require the EIN open any accounts.
What is an EIN?
An EIN, or Employer Identification Number, is a nine-digit number assigned to your business for the Internal Revenue Service (IRS). The EIN identifies your business with the government much like a personal Social Security number.
What business entities need an EIN?
The types of business entities that need an EIN include:
- An LLC with employees (even if owned by one person)
- An LLC with more than one member
- A partnership (LLC or C-corp)
Please Note: A sole proprietorship is the only business entity that is not required to have an EIN.
Why is an EIN necessary?
The more common reasons you would need an EIN are:
- To hire employees
- To open a bank account in the U.S.
- To file your company’s taxes
- To pay independent contractors
Please Note: If you collect revenue of any kind through a business entity, you will need an EIN.
Swyft Filings offers EIN services for small businesses in Arizona. Find more information here.
Phase Two: Maintaining Your Arizona LLC
After setting up your Arizona LLC, there is another set of steps that will help move your business forward and stay compliant:
- Step 1: Register for Taxes in Arizona
- Step 2: Apply for Permits and Licenses
- Step 3: Request a Certificate of Good Standing
Step 1: Register for Arizona State Taxes
Arizona is one of the few states that does not require LLCs to pay a corporate or franchise tax/annual fee tax. Regardless of industry, all LLC members must pay state and federal income taxes on their earnings.
State Income Taxes
The table below shows the state income tax rates for Arizona
Additional Tax Information
Other taxes your LLC may need to pay:
- Transaction Privilege Tax
- Employee Withholding Tax
- Unemployment Tax
Step 2: Obtain Business Licenses and Permits
The licenses and permits required for an LLC in Arizona can vary, depending on a number of variables:
- Location (city and county)
- Type of Business
Certain LLC businesses in Arizona will need a Transaction Privilege Tax license :
- Any business selling physical goods
- Any business that sells taxable services
- Hotels, motels, and property rentals
Tip: If you would like to see more in-depth information on licenses and permits, please feel free to visit the content in our learning library that covers business licenses and permits.
Step 3: Obtain a Certificate of Good Standing
After the formation of your Arizona LLC, the last step is to secure a Certificate of Good Standing for your business.
What is a Certificate of Good Standing?
The Certificate of Good Standing is an official notification from the government agency that confirms your entity has been properly filed and is still in compliance.
Who issues the Certificate of Good Standing?
The Certificate of Good Standing is generally issued by the Secretary of State.
When can I request a Certificate of Good Standing for my business?
A request for a Certificate of Good Standing can be filed after your Arizona LLC is officially formed through the Secretary of State.
Why do I need a Certificate of Good Standing?
A Certificate of Good Standing provides financial institutions and other business with the assurance that your business is fully compliant with the state.
Additionally, some states require a Certificate of Good Standing before a business can apply for Foreign Qualification.
Swyft Filings can create a Certificate of Good Standing for your Arizona LLC. Click here for more information.